The bankruptcy trustee for the Southern Montana Electric power cooperative has hired an investigative attorney to look into what happened to the co-op’s money.

The U.S. Bankruptcy Court this week also approved the hiring by Southern of the Eide Bailly accounting firm to audit the books and to prepare taxes.

Trustee Lee Freeman, a Livingston attorney appointed by the U.S. Bankruptcy Court to manage Southern’s re-organization, said in court records that he needed investigative counsel to look into concerns raised by some of Southern’s members about the actions of the co-op’s former manager, Tim Gregori, and the relationships between Southern and two other entities.

Southern Montana Electric Generation and Transmission Cooperative, a Billings-based wholesale power supplier, filed for bankruptcy in October, saying it was $21.4 million in the red with assets of $110.4 million and liabilities of $131.8 million. Southern’s secured and unsecured creditors include mortgage holders for the $85 million Highwood Generating Station, a 40-megawatt natural gas plant the co-op built near Great Falls.

Southern provides electricity mainly to its members, which include the Yellowstone Valley, Beartooth, Fergus, Mid-Yellowstone and Tongue River electric co-ops and the city of Great Falls.

Shortly after Southern filed for bankruptcy, Yellowstone, Beartooth and Great Falls called for an investigation of Southern’s business transactions and finances.

Freeman hired Nancy Temple with the law firm Katten & Temple LLP in Chicago in January because of her experience in law and accounting. Freeman also has previously worked with Temple.

“Because of the extreme importance of this case, the Trustee requires retention of counsel with whom he has full and complete confidence; Ms. Temple is such a person,” Freeman said in court records.

While other firms may be qualified, the trustee said he was unaware of local firms that could do the work. Temple is working for a reduced rate of $400 an hour; her normal rate is $450 an hour.

Temple is a Harvard-educated attorney and certified public accountant with a forensic accounting background. She has extensive experience in state and federal trial and appellate courts and works primarily in commercial litigation.

Temple previously worked for the defunct accounting firm Arthur Andersen, whose 2002 conviction for destroying Enron Corp.-related documents was overturned by the U.S. Supreme Court. A memo by Temple regarding the disposal of Enron documents was part of the government’s case.

Temple’s experience includes investigating and analyzing a hedge fund failure in which the trading manager later pleaded guilty to securities fraud and working on bankruptcy matters, including fraudulent conveyance issues, court records said.

Most of Southern’s members supported having an investigative counsel.

Billings attorney Jeff Hunnes, who represents Tongue River, said, “We see this as a necessary step in this bankruptcy case, given the contentions that have been raised. We don’t expect any adverse findings, but we don’t know.”

Mid-Yellowstone’s attorney, Gary Ryder of Hysham, said the co-op had no objections. “We would like to have an accounting, too. Everybody wants to know,” he said.

Yellowstone Valley welcomed Temple’s investigation.

Terry Holzer, Yellowstone Valley’s retired manager who is helping with the bankruptcy case, said, “The question is what happened to the money. We’re interested to see what the report says.”

Yellowstone Valley, Holzer said, has asked Temple to look into whether Southern used Yellowstone Valley’s money to help pay for Highwood and its debts. Yellowstone Valley objected to building the Highwood plant and did not participate in that project.

Great Falls City Attorney James Santoro said the city didn’t object to hiring Temple but questioned the administrative expense and complained about an overall lack of information from the trustee.

“We just don’t have the information why and if that’s needed,” he said. “There’s a lot of money being spent on fees, a lot of activity going on we’d like to know about. The key overall has been, in bankruptcy, things are transparent. Not opaque,” he said.

Freeman said in an interview that Southern has saved more than $3 million in the last two months and is looking for more ways to cut costs. The administrative costs, he added, are modest compared to what Southern is saving.

 

 

0
0
0
0
0